Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
CF Industries Holdings, Inc. (NYSE:CF) was in 42 hedge funds’ portfolios at the end of December. CF investors should pay attention to an increase in enthusiasm from smart money recently. There were 33 hedge funds in our database with CF positions at the end of the previous quarter. Our calculations also showed that CF isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to go over the fresh hedge fund action surrounding CF Industries Holdings, Inc. (NYSE:CF).
How are hedge funds trading CF Industries Holdings, Inc. (NYSE:CF)?
At Q4’s end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CF over the last 14 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Eminence Capital was the largest shareholder of CF Industries Holdings, Inc. (NYSE:CF), with a stake worth $170.4 million reported as of the end of September. Trailing Eminence Capital was Glendon Capital Management, which amassed a stake valued at $125.5 million. Platinum Asset Management, Millennium Management, and Slate Path Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have jumped into CF Industries Holdings, Inc. (NYSE:CF) headfirst. Columbus Circle Investors, managed by Principal Global Investors, assembled the most outsized position in CF Industries Holdings, Inc. (NYSE:CF). Columbus Circle Investors had $31.9 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $7.2 million investment in the stock during the quarter. The following funds were also among the new CF investors: Louis Bacon’s Moore Global Investments, Steve Cohen’s Point72 Asset Management, and Parvinder Thiara’s Athanor Capital.
Let’s go over hedge fund activity in other stocks similar to CF Industries Holdings, Inc. (NYSE:CF). These stocks are Apollo Global Management LLC (NYSE:APO), Tableau Software Inc (NYSE:DATA), Alliant Energy Corporation (NASDAQ:LNT), and Apache Corporation (NYSE:APA). This group of stocks’ market values match CF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APO | 22 | 1244232 | 0 |
| DATA | 36 | 2250740 | -1 |
| LNT | 28 | 604082 | 8 |
| APA | 29 | 475425 | 3 |
| Average | 28.75 | 1143620 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $1144 million. That figure was $924 million in CF’s case. Tableau Software Inc (NYSE:DATA) is the most popular stock in this table. On the other hand Apollo Global Management LLC (NYSE:APO) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks CF Industries Holdings, Inc. (NYSE:CF) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately CF wasn’t in this group. Hedge funds that bet on CF were disappointed as the stock lost .3% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
